What next?
A return figure only means something next to inflation, fees and time. These supply the context.
External links are marked and open in a new tab. Past performance is not a guide to future returns, and this is not financial advice.
How to use this calculator
- Enter the initial value you invested and the final value now.
- Enter the holding period in years.
- Read your total return and annualised return (CAGR).
What your result means
CAGR (compound annual growth rate) is the steady yearly rate that would take your initial value to its final value — a fairer comparison than total return because it accounts for time. A 50% gain over five years is far less impressive than over one. Figures are before fees, taxes and inflation, and past performance does not predict future returns.
Why this one is different
The headline figure here is the annualised rate, not the total gain, because total gain flatters a long holding and hides a slow one. Enter what you put in, what it is worth now and how long it took, and the compound rate that connects them is what the page leads with.
Why "up 50%" can be a disappointing return
A 50% gain sounds great — until you learn it took fifteen years. Total return hides the pace of growth, which is why professionals compare investments using the annualised rate (CAGR). It levels the playing field between a quick win and a slow burn.
Once you can annualise a return, marketing headlines lose their power and you can judge whether an investment actually beat a simple index fund — or just took longer to get there. For a plan with contributions arriving month after month, the mutual fund planner computes the money-weighted return, which is the only fair way to annualise a stream of payments.
How it works
Total return is simply how much more (or less) your investment is worth. But a 50% total return over 2 years is very different from 50% over 10 years — so the annualised return, or Compound Annual Growth Rate (CAGR), smooths it into a single yearly rate that lets you compare investments fairly.
Formula
Example calculation
An investment growing from £5,000 to £8,000 over 6 years:
CAGR = (8,000 ÷ 5,000)^(1/6) − 1
CAGR = (1.6)^0.1667 − 1 = 8.15% per year
Frequently asked questions
Does CAGR account for deposits along the way?＋
No. CAGR assumes a single lump sum. If you added money over time, use money-weighted return (IRR) instead — a future Tool Corner tool.
Is this before or after inflation?＋
Before (nominal). Subtract inflation from the CAGR to estimate your real return.
What is the difference between CAGR and average annual return?＋
CAGR is the smoothed rate that would take you from the start value to the end value over the period. A simple average of yearly returns is almost always higher and is misleading — a year of plus fifty per cent followed by minus fifty per cent averages zero but leaves you down twenty-five per cent.
Why does the order of returns matter if I am adding or withdrawing money?＋
Because the amount exposed to each year’s return differs. With no contributions the order is irrelevant to the final figure. Once money is flowing in or out, a poor year when the balance is large does far more damage than the same year when it is small — which is why withdrawal plans are especially sensitive to early losses.
Should I compare my return to an index?＋
It is the most informative comparison available. A ten per cent return is strong in a flat year and poor in a year the market rose twenty. Comparing against a relevant benchmark over the same period tells you whether the result came from the decision or the conditions.
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Assumptions & limitations
Every figure here comes from a simplified model. Keep these limits in mind when reading your result:
- Past or assumed returns don’t guarantee future results.
- Ignores tax, platform fees and inflation.
- Investments can fall as well as rise — you may get back less than you put in.